ECB Survey Gives Inflation Forecast for 2023-2025, Raises Economic Growth Forecast

The European Central Bank released a survey of professional forecasters on May 5. Respondents' forecasts for overall Harmonised Index of Consumer Prices (HICP) in 2023 were revised down from the previous survey, while the forecasts for HICP excluding food and energy were revised upwards in 2023.

The downward revision to inflation mainly reflects lower energy price inflation expectations (particularly natural gas), while the upward revision to HICP expectations excluding food and energy mainly reflects the results of recent data, as well as higher wage growth forecasts.

Overall inflation expectations for the next three years are now at 5.6%, 2.6% and 2.2%, respectively, while longer-term inflation expectations (related to 2027) are unchanged at 2.1%.

The forecast for real GDP growth in 2023 was revised upwards, but forecasts for 2024 and 2025 were revised down slightly.

The upward revision to growth in 2023 mainly reflects the impact of stronger-than-expected growth in the fourth quarter of 2022, while the downward revisions to growth in 2024 and 2025 mainly reflect tightening financial conditions. The long-term economic growth forecast was left unchanged at 1.4%.

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